Ninety One has published its annual Planetary Pulse Report which has outlined asset owners position on climate related strategies.

The report surveyed 300 senior professionals at asset-owner institutions in the UK, Southern Africa, Asia Pacific, Western Europe, and North America including pension funds, insurers, endowments, foundations, central banks and sovereign wealth funds.

It shows that among the asset owners with climate-related targets, 48% set them at overall portfolio level, while 46% set targets for specific mandates, portfolios or funds. Only 28% set their targets at asset-class level. It also found 60% of asset owners say fighting climate change is one of their fund’s strategic objectives, with 51% saying their fund has emissions-reduction targets in place.

Only 19% say they use transition finance to any extent. Fewer still say their fund invests in transition-finance assets in emerging markets (16%), the regions where emissions and populations are growing the fastest.

For the majority (87%), no more than half of their organisation’s AUM falls under climate-related strategies, and 46% have no more than a quarter in these portfolios. Additionally, only 11% have from half to three-quarters of their AUM in climate-related strategies, and less than 1% have more than three-quarters. In the next three years, 19% expect to have from half to three-quarters of their AUM in climate-related strategies, and 2% will have more than three-quarters.

55% of asset owners surveyed say their fund is not focused on any goal beyond the risk-and-return performance of their assets. There is a view, held by 40% of asset owners, that climate-related investing leads to lower returns.

Hendrik du Toit, Founder and CEO, Ninety One says, “To meet international, national and organisational climate targets, we need to decarbonise energy, replace myriad industrial processes with clean alternatives, improve energy efficiency, and transform infrastructure. Transition finance is the legitimate and effective alternative that enables the move from brown to green while meeting standard risk-and-return objectives. Financing even heavy emitters, as long as they are on a verifiable path to net zero and promising attractive risk-adjusted returns, will reap benefits for investors as well as the planet. We must mobilise transition finance alongside green investment. By allocating finance to transition, asset owners can profitably participate in the world’s adaptation to net zero and help mitigate climate change. Transition finance is not in conflict with the fiduciary duty of asset owners. It is an attractive return opportunity which at the macro level mitigates the biggest systemic risk of our time.”